SYDNEY: The Australian and New Zealand dollars probed multi-month peaks against the Japanese yen and the euro on Wednesday as a bounce in risk appetite saw investors amassing positions in high-yielding currencies.
The Aussie rose to near 6-1/2 month highs against the yen and was not far from a 17-1/2 month peak against the euro.
The demand on the crosses helped the Aussie stabilise on the U.S. dollar around $0.7560, following last week's retreat from $0.7760.
The greenback is near 11-month highs against a basket of currencies following upbeat economic data that cemented expectations of a Federal Reserve rate hike in December.
"The market is mired in a tug of war between higher U.S. yields and spirited risk-on appetite," said Stephen Innes, senior currency trader at OANDA Australia and Asia Pacific.
Also helping the Aussie is a recent rebound in commodity export prices, which has boosted Australia's terms of trade.
The Aussie briefly dipped 0.2 percent to a low of $0.7540 after data showed wages grew at their slowest pace on record last quarter, suggesting a downside risk to inflation.
But that was not enough to alter broader market views that the Reserve Bank of Australia (RBA) may be done cutting interest rates for now. Futures imply a mere 12 percent chance of a cut by mid-2017.
The New Zealand dollar was steady at $0.7097, having steadied above a one-month low hit early this week.
Against the yen, the Kiwi was near its highest level since April, thanks to carry trades where investors borrow in safer assets to buy riskier, high-yielding currencies.
A steady increase in the prices of milk products - New Zealand's key export - also boosted sentiment.
The country was still reeling from the impact of several strong earthquakes that snapped transportation links and completely cut off the small South Island town of Kaikoura.
Damage from the devastating quakes is still being assessed but economists believe rebuilding work will likely push inflation higher, narrowing the probability of another rate cut by the Reserve Bank of New Zealand (RBNZ) next year.
The RBNZ cut interest rates this month to a record low 1.75 percent.
New Zealand government bonds eased, sending yields 2 basis points higher at the long end of the curve.
Australian government bond futures were mixed, with the three-year bond contract down 1 tick at 98.16. The 10-year contract was unchanged at 97.375.
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